State aid: Commission endorses €47
million aid to Wacker Schott and opens in-depth investigation into €48
million aid to Deutsche Solar, two German firms in the solar
sector

The European Commission has
authorised, under EC Treaty state aid rules, €47 million of aid, which the
German authorities intend to grant to Wacker Schott for the production of solar
wafers in Thüringen, Germany. The project involves investments of
€322 million and is expected to significantly increase direct and indirect
employment. The Commission found the measure to be compatible with the
requirements of the Regional Aid Guidelines 2007-2013 (see IP/05/1653)
and in particular with the rules on large investment projects. At the same time,
the Commission opened a formal investigation under EC Treaty state aid rules
into €48 million aid for a similar project of solar wafer production by
Deutsche Solar in Saxony, Germany. In this case, the Commission has concerns
that the aid is in fact part of a single investment project. According to the
Regional Aid Guidelines 2007-2013, if this proves to be the case, the current
proposed aid would need to be reduced. The opening of an in-depth investigation
gives interested parties the possibility to comment on the proposed measure. It
does not prejudge the outcome of the procedure.

Competition Commissioner Neelie Kroes said: “I am pleased to approve
aid for the large investment project by Wacker Schott which is expected to
create more than 500 direct and indirect jobs and will contribute to the
development of the region. In the case of Deutsche Solar, however, we need to
ensure that the aid does not merely reinforce the competitive position of this
company without added value for regional cohesion. This is why we are opening an
investigation on the proposed aid for Deutsche Solar."

Both projects concern the manufacturing of solar wafers which are used to
produce solar cells out of which solar modules are made. Solar modules convert
sunlight into electricity.

Wacker Schott is a newly created company which will set up two new plants in
Jena, Thüringen. The investment costs taken into consideration for the
calculation of the aid are €322 million, while the actual aid amount is
€47 million.

Deutsche Solar already has two plants in Freiburg: Freiberg South and
FreibergSaxonia. It now intends to create a third plant in FreibergEast. The
investment costs taken into consideration for the notified measure are
€350 million, while the notified aid amounts to €48 million. An
extension of the FreibergSouth plant will also receive aid. The German
authorities considered that this aid did not need to be notified to the
Commission because the total investment costs were below €50 million.

Both projects are to be carried out in areas eligible for regional aid under
Article 87(3)(a) of the EC Treaty as a region with an abnormally low standard of
living and high unemployment.

In both cases, the aid (paid out in the form of an investment premium and a
grant) is granted under existing aid schemes but due to the high amounts of aid
and investment costs involved, the measure had to be notified to the Commission
for individual assessment and clearance.

The Commission verified in both cases whether the market share of the
beneficiary and the production capacity created by the investment remain below
the thresholds set in the Regional Aid Guidelines. The relevant product markets
in the two cases are the markets for solar wafers, for solar cells and for solar
modules.

The Commission found that both companies' shares on the relevant worldwide
markets would remain below the 25% threshold, both before and after the planned
investment. The Commission also concluded that the relevant markets were growing
rapidly compared to the EEA growth rate and that therefore the additional
production capacity created by the projects would not raise concerns.

Therefore, in the case of Wacker Schott, the effect of the aid on competition
is deemed to be outweighed by its positive contribution to regional development.

However, in the case of Deutsche Solar, the Commission is concerned that the
aid is not fully in line with Regional Aid Guidelines 2007-2013 and its
conditions for granting aid for large regional investment projects. These
guidelines include a progressive reduction of the regional aid ceiling for very
large projects, because these suffer less from typical regional handicaps than
smaller projects. If, the measure for the construction of the FreibergEast plant
forms a single investment project with the extension of the FreibergSouth plant,
the scaling down would apply to the combined investment and therefore the
notified amount of aid for the FreibergEast plant would need to be reduced.
Deutsche Solar and the German authorities maintain that they should be
considered as separate investments. The Commission therefore needs to
investigate the potential technical, functional, strategic and geographic links
between the two investment projects of FreibergEast and FreibergSouth, which
started almost simultaneously.

In the Wacker Schott case, the company agreed that the two separate plants in
Jena should be considered as a single investment, so it is not necessary to
investigate this issue further.

The non-confidential version of the decisions will be made available under
the case number N 773/2007 (Wacker Schott) and N170/2008 (Deutsche solar) in the
State Aid
Register on the DG
Competition website once any confidentiality issues have been resolved. New
publications of state aid decisions on the internet and in the Official Journal
are listed in the State Aid
Weekly e-News.